Saturday July 21, 2012
Factory, jobs data show US economy mired in weakness
WASHINGTON: The slowdown in the US economy persisted early in the third quarter as factory activity in the US mid-Atlantic region contracted in July for a third straight month and new claims for jobless aid surged last week.
Other reports on Thursday showed home resales slumped to their lowest level in eight months in June and a gauge of future economic activity slipped last month.
“The data confirm that the economy has cooled off pretty considerably late in the second quarter and early in the third quarter from the pace we saw earlier in the year,” said Omair Sharif, an economist at RBS in Stamford, Connecticut.
The economy has been hit by fears of deep government spending cuts and higher taxes next year, as well as troubles from the debt crisis in Europe, culminating in slower job growth, weak consumer spending and soft manufacturing output.
The Philadelphia Federal Reserve Bank said its business activity index for the mid-Atlantic region came in at a reading of minus 12.9 in July compared with minus 16.6 last month.
A reading below zero indicates contraction in output in factories in eastern Pennsylvania, southern New Jersey and Delaware.
New orders dropped for a third consecutive month, and a gauge of employment declined sharply to a near three-year low.
Growth in US factory output slowed to a 1.4% annual rate in the second quarter after a brisk 9.8% pace in the first three months of the year, and the Philadelphia Fed’s regional factory index suggested a continued loss of momentum.
Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, said the biggest factor weighing on the recovery was fear that politicians in Washington would be unable to avoid the so-called fiscal cliff at the turn of the year.
“While there are real issues out there, such as Europe, what seems to be the overarching factor driving business decisions is the fear of a fiscal fiasco.
“Gridlock is no longer just a political game. It is having real economic effects. Until business leaders can plan with more certainty, there is little chance the economy can accelerate to a solid pace,” Naroff said. — Reuters